Isle of Palms Resort [2005] QBCCMCmr 515 (16 September 2005)

Last Updated: 19 July 2006

REFERENCE: 0493-2005

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	20860
Name of Scheme:	Isle of Palms Resort
Address of Scheme:	21 Coolgardie Street ELANORA QLD 4221

TAKE NOTICE that pursuant to an application made under the abovementioned Act by

Joye Gooden, the Owner(s) of lot 109

I hereby order that the application to have ruled out of order a resolution that the body corporate enter into a new caretaking and letting agreement with Eastmond Enterprises Pty Ltd and Varindi Pty Ltd is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0493-2005

"Isle of Palms Resort" CTS 20860

Application

Isle of Palms Resort Community Titles Scheme (Isle of Palms) is a 174 lot scheme under the Body Corporate and Community Management Act (Act) and the Act’s Accommodation Module Regulation (Accommodation Module).

This is an application by Joye Godden, owner of lot 109 (applicant) seeking orders against the body corporate for Isle of Palms (respondent).

Submissions

The applicant challenges the validity of this resolution on the basis that:

1. Contrary to the legislation, the body corporate was required to consider a motion to extend the authorisation of the caretakers more than once in a financial year (Accommodation Module, 39(4)(c)).
2. The information for the meeting was misleading to owners because it said the committee submitted the motion when it was in fact submitted by the caretakers. It also said that the specialist adjudicator has ordered a new agreement but the applicant believes this to be the caretakers’ current option.

The caretakers have provided submissions to the effect that:

1. The motion in question proposed a new engagement rather than amending an existing engagement. It is therefore argued that section 39 of the Act does not apply to prevent this type of motion being put forward a number of times in one year; and
2. There was nothing misleading in the explanatory note or in the motion mistakenly being listed as submitted by the committee. In particular, the caretakers submit that:

a. Voters are required to vote on the motion and not on the persons supposedly supporting the motion. It is stated that the explanatory note clearly states that the motion was "Submitted by the owners of lot 180" and it was not their fault that the motion was mistakenly listed on the voting paper as submitted by the committee; and
b. It was not misleading for paragraph one of the explanatory note to refer to the order of the specialist adjudicator that the body corporate enter into new management rights agreements with them because that paragraph was not intended to be read in isolation. The caretakers make reference to paragraph three of that explanatory note that reads "Additionally, they desire to have an option for a further 10 years. Such a term is allowable under the provisions of the Body Corporate and Community Management legislation. This legislation also provides that the Body Corporate may require Eastmond/Varindi to pay a transfer fee upon the sale of the management rights within 3 years should the new agreements be granted".

Other owners have also provided submissions. These submissions are particularly relevant to the question of whether owners were misled and will be discussed later.

Decision

Multiple requests for extension within one year

The legislation includes provisions to the effect that:

• Letting agents and service contractors may be engaged by the body corporate for a maximum term of 25 years (including options). These engagements can be subsequently amended to extend the term but the length of any additional right or option must only be for a maximum of 5 years and must not result in the unexpired term going over the 25 years (Accommodation Module 79, 80);
• The material for notice of a meeting considering an amendment to include an extension of an engagement as a service contractor or letting agent must include an explanatory note in the approved form (Accommodation Module 85(2)(c)(ii));
• The material for notice of a meeting considering a new engagement of a service contractor or letting agent must include the terms of the new engagement (Accommodation Module 85(2)(c)(i));

The legislation also provides that a motion proposing an engagement of a service contractor or letting agent be amended to include a right or option of extension or renewal may not be included in the agenda for a general meeting more than once in a financial year for the body corporate (Accommodation Module 39(4)(c)). The relevant explanatory notes state that this provision was introduced "to eliminate a practice where general meetings are being continually called to deal with a motion that was defeated at an earlier meeting. This practice has led to the threat of constant meeting costs being used as a tactic to harass lot owners into voting for a particular issue. Stakeholders indicate that motions dealing with regulation modules, remuneration paid and the term of a contract cause the most problems".^[1]

It is perhaps arguable that actions of an existing caretaker contravene the spirit of the above provision by putting forward, for a second time, a motion requesting owners’ approval to a new agreement with a longer term. However, section 39(4)(c) refers to the seeking of an additional option of extension or renewal. This would be an option for a maximum of five years under sections 79, 80 and 85(c)(ii) of the Accommodation Module rather than the seeking of an entirely new agreement subject to section 85(c)(i). The motion put forward by the caretakers proposed an entirely new agreement pursuant to section 85(c)(i) and included a copy of the proposed terms of the agreement. It was not a motion proposing amending the engagement to include an extension of up to five years under section 85(c)(ii). I therefore conclude that putting forward a motion proposing a new agreement twice in one year was not contrary to section 39(4)(c) as it technically proposed entry into an entirely new agreement rather than an amendment of an existing agreement.

Misleading information provided to owners

Explanatory Note

The applicant makes claims to the effect that owners were misled by the explanatory schedule into thinking they needed to vote in favour of a new contract for the caretakers because of an order made by a specialist adjudicator.

The first paragraph of the explanatory note states "The Specialist Adjudicator has confirmed that the Caretaker/Letting Agents (Eastmond/Varindi) have validly exercised their options to extend the term of the existing Caretaking and Letting Agreements for ten (10) years from December 2004. The Specialist Adjudicator has further ordered that the Body Corporate enter into new Caretaking/Letting Agreements with Eastmond/Varindi".

On its own, I accept that the above paragraph could mislead owners into thinking they needed to vote for the motion to comply with orders of an adjudicator. However, it is less arguable that this paragraph is misleading when it is read with the second and third paragraphs of the explanatory note that state:

"Eastmond/Varindi are desirous of obtaining new Caretaking and Letting Agreements that will provide to all parties to the Agreements a greater measure of clarity and certainty as to the terms and conditions.

Additionally, they desire to have an option for a further 10 years. Such a term is allowable under the Body Corporate and Community Management Legislation. This legislation also provides that the Body Corporate may require Eastmond/Varindi to pay a transfer fee upon the sale of the management rights within 3 years should the new agreements be granted".

Since the passing of the resolution, owners have had an opportunity to consider the various arguments raised and make submissions upon whether they were actually misled by the explanatory note outlined above.

Approximately thirty owners have made submissions to the effect that they were not misled in providing their vote and would vote the same way again. Approximately fifteen submissions oppose the resolution that the body corporate enter into a new engagement with Eastmond/Varindi. However, only about five of these indicate that the owners felt misled and other submissions merely indicate that the owners opposed the resolution or felt that other owners may have been misled. Even those submissions from owners who felt misled do not clearly indicate that they were misled into voting in favour of the motion when they would have otherwise voted against it.

I conclude that the motion, in all the circumstances, was not misleading to owners. In particular, while a number of owners thought that other owners may have been misled it appears that the vast majority of owners who voted had made up their own minds on the issue and do not feel they were misled even after being given the opportunity to reconsider the matter and make a submission.

I therefore do not consider the circumstances justify an order overturning the resolution.

Person submitting motion

Technically, the legislation requires that the name of the person who submitted the motion must be listed on the voting paper (Accommodation Module 40A(5)(a)). By the listing of the motion as submitted by the committee, owners may have been misled into thinking that the committee had reviewed the agreement and considered it to be in the best interests of the body corporate. However, the evidence suggests that persons were not actually misled and the explanatory note clearly states that the motion was "Submitted by the owners of lot 180". I also accept that it was not the respondents’ fault that the motion was mistakenly listed on the voting paper as submitted by the committee.

The District Court has recognised that the very detailed provisions of the regulations make it almost inevitable that from time to time there will be non-compliance with the legislation but that non-compliance of an insubstantial nature should not be allowed to imperil the actions of bodies corporate or their committees, particularly where actions are taken in good faith.^[2] In all the circumstances, including the majority of submissions indicating that owners were not actually misled, I do not consider a mistaken listing of the motion as being submitted by the committee justifies an order overturning the resolution.

Other matters

Some further matters are raised by the applicant. These include concerns that the caretakers have distributed newsletters, telephoned owners, and have encouraged submissions from owners in a certain form. However, I note that information has also been circulated that puts forward the applicant’s view of the matter. The legislation does not specifically restrict any communications of this nature. Rather, individual owners could complain if they feel that they are being harassed or subjected to undue pressure.

The applicant also refers to alleged discrepancies in the minutes and voting and says that the severe weather conditions should have resulted in the meeting being called off. However, I am not satisfied that either of these matters amount to a proper basis to overturn the meeting.

Order

For these reasons, the application is dismissed.

^[1] Explanatory Notes for SL 2003 No. 263 Body Corporate and Community Management Legislation Amendment Regulation (No. 1) 2003, page 40.
^[2] Wei-Xin Chen v Body Corporate for Wishart Village CTS 19482, Appeal 4080 of 2000, District Court Brisbane, 29 May 2001.